Lawsuit contends that bureau is exceeding authority by investigating discrimination as part of examination process.
In their latest shot at the CFPB, the U.S. Chamber of Commerce and several banking trade groups filed suit this week in federal court contending that agency officials exceeded their authority when they decided to investigate discrimination as part of their examination process.
The CFPB amended the manual that guides examiners and directed them to probe discrimination by financial institutions as part of its power to investigate Unfair, Deceptive or Abusive Acts or Practices (UDAAP) at financial institutions, said the Chamber, the American Bankers Association, the Independent Community Bankers of America and their Texas affiliates in the suit, filed in the U.S. District Court for the Eastern District of Texas.
“The CFPB cannot regulate discrimination under its UDAAP authority at all because Congress declined to give the CFPB authority to enforce anti-discrimination principles except in specific circumstances,” the groups charged in the lawsuit.
They added, “The CFPB has stretched its UDAAP authority beyond the bounds carefully set by Congress.”
The Chamber earlier this year launched a campaign charging that CFPB Director Rohit Chopra is exceeding his authority in several areas. The lawsuit is the latest part of that campaign.
Where Do Credit Union Stand on the Issue?
Credit union trade groups are not part of the lawsuit. However, NAFCU said in a recent policy brief that the agency’s decision to investigate discrimination is a “serious shift in the CFPB’s stance on UDAAP that is likely to result in a more opaque UDAAP landscape and an increase in compliance costs.”
The Chamber and banking groups go further, alleging that the updated examination manual is arbitrary and capricious because Dodd-Frank did not give the agency authority to enforce discrimination laws.
The groups also contend that the updated manual violates federal law because the CFPB did not solicit public comment before it was issued.
“These amendments to the manual harm Plaintiffs’ members by imposing heavy compliance costs that are ultimately passed down to consumers in the form of higher prices and reduced access to products,” they said.
Finally, the trade organizations charge that funding for the CFPB is illegal because the agency is not subject to the appropriations process.
The U.S. Supreme Court ruled in 2020 that the agency was illegally constructed because the president could only remove the director for cause. As a result of the ruling, the president now has the power to remove the director at any time.
The funding issue was not addressed by the court. The CFPB currently is funded through the Federal Reserve.
The groups ask that the updated manual be rescinded.
Response From the CFPB
CFPB officials declined to comment on the lawsuit, but an agency spokesperson told CUCollaborate that the bureau prides itself on its transparency.
“The CFPB is one of the most transparent regulatory agencies, and voluntarily publishes exam manuals laying out how it will assess banks’ compliance with the federal laws Congress charged the Bureau with enforcing,” the spokesperson said. “The CFPB’s exam manuals allow banks to ensure they are following the law and help make certain that consumers are receiving the fair and equitable treatment they deserve.”
A progressive government watchdog group was far less restrained.
“The Chamber of Commerce thinks we’re all dumb enough to celebrate C-Suiters as antiracists and feminists while they literally go to court to protect their right to discriminate,” said Max Moran, personnel team research director for the Revolving Door Project, part of the Center for Economic and Policy Research. “Chopra’s integration of discriminatory practices into UDAAP enforcement is long overdue—I mean, in what universe is discrimination not an ‘unfair, deceptive, and/or abusive act or practice’?”